Tiptree Inc.

Thank you for standing by. This is the conference operator. Welcome to the TipTree Inc. 3rd Quarter 2022 Earnings Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Scott McKinney, Deputy CFO. Please go ahead.

Good morning, and welcome to our third quarter 2022 earnings call. We are joined today by our Executive Chairman, Michael Barnes, CEO, Jonathan Alani, and CFO, Sandra Bell. A copy of our earnings release and investor presentation are on our website, tiptreeinc.com. Please note that some of our comments today will contain forward-looking statements based on our current view of our business, and actual future results may differ materially. Please see our most recent SEC filings, which identify the principal risks and uncertainties that could affect future performance. During the call this morning, we will discuss non-GAAP financial measures, which are described in more detail in our presentation. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our SEC filings, the appendix to our presentation, and posted on our website. With that, I'll turn the call over to Michael.

Thank you, Scott, and good morning to everyone. Before we dive into the quarter, I'm sure you've all seen the announcement that our CFO, Sandra Bell, will be retiring at the end of March next year. Along with the rest of the board, I want to personally thank Sandra for her leadership and contributions to Tiptree over the past several years. Sandra has been an integral part of our senior management team since joining us in 2015. She has built a top-notch finance organization that is well-positioned for the future. Taking over from Sandra will be Scott McKinney, our current Deputy CFO. Scott has been with us for many years, has a deep understanding of our businesses, and is well qualified and prepared to take on his new responsibilities. Both Jonathan and I, as well as the Board of Directors, are excited to welcome Scott to his new role. Sandra and Scott have worked well together over many years and will ensure a smooth transition over the coming months. Moving to the quarter, I plan to give a brief update and then we'll let Sandra walk through the financial highlights. When we set out our plans for 2022, we had several key objectives in mind. First, closing the investment in Frategra with our new partners Warburg Pincus. Second, continue to execute on the growth plan at Frategra, including looking at ways to potentially accelerate the growth profile all while maintaining the company's excellent underwriting track record. Third, generate solid returns on capital deployed within our businesses in tip-tree capital. Through the nine months, we are pleased with where we stand against each of those objectives. The $200 million investment by Warburg Pincus and Protegra closed in June. Protegra is quickly putting the fresh capital to work with substantial growth in E&S premiums. we remain focused on growing both the specialty insurance and service contract businesses. While we expect most of the growth to be organic through product and distribution expansion, we are always looking for complementary bolt-on acquisition. Fortegra's premiums and equivalents grew by 21% year-over-year to nearly $2 billion, led by strength in U.S. specialty insurance lines and service contract businesses in the U.S. and Europe. The combined ratio remained consistent at 91% as the team has executed its growth plan while keeping underwriting discipline and a steady cost infrastructure. For the year, Fortegra's adjusted net income was $60 million, up 29% from 2021, which represented an adjusted return on equity of 26%. We continue to take a conservative approach with the $1.1 billion investment portfolio. At quarter end, the fixed income portfolio was AA plus rated with a 2.1 year duration, and notably, one-third was held in cash or money market funds. We believe there will be near-term opportunities to deploy a significant amount of this cash into higher-yielding investments while continuing to maintain our long-term conservative view. Like many other insurance companies, We experienced unrealized losses on fixed income securities this year, representing approximately $1.55 of tip-free book value per share, as a result of several market factors, most notably the dramatic rise in interest rates. As we have stated on prior calls, our investment approach is geared toward the long term. We expect to recover most of the unrealized marks over the coming years as bonds mature and we'll invest available cash at attractive higher yields. In our marine business, we had an active nine months with both dry bulk and tanker investments producing strong returns. In the quarter, we sold the remaining two dry bulk vessels, putting total proceeds at 68 million or a net gain of 21 million. We also signed definitive agreements to sell our two product tankers for an aggregate of $49 million or a gain of 44%. We expect those sales to close before year end. Finally, while the broader mortgage markets are experiencing significant headwinds, our mortgage business produced positive returns through three quarters, driven by the servicing side of the business and active cost management. While volumes and margins have compressed, over the past two years, the business has grown retained earnings substantially, and we now hold an MSR asset worth $42 million on our balance sheet. As we look ahead, we believe TipTree is well positioned for the future. Our capital position is strong, we are now debt-free as a holding company, and we continue to look for opportunities that will drive long-term value, including buying back shares as opportunity presents itself. With that, I'll pass it to Sandra for the quarterly financial update.